As the US government’s enervation and economically illiterate interventionism fuel trade wars and dreams of autarky, it is worth looking at the long historical experience of economic isolation that started under the late Chinese emperors at the time of our High and Late Middle Ages. Three books help us understand the world in that regard.

The autarky episode is summarized in Water Schiedel, Escape from Rome: The Failure of the Empire and the Road to Prosperity (Princeton University Press, 2019, pp. 400 ff.), which I reviewed in Regulation under the title “Let’s Travel That Road Again” (Spring 2020). Schiedel wrote:

In the late fourteenth century, the [Ming] dynasty’s founder, the Hongwu emperor, embarked on ambitious antimarket reforms that sought to restore autarkic village economies …

The [previous] Mongol [1271-1368] regime first set up a state monopoly on overseas trade and then banned private merchants from dealing with foreign parties altogether. The Ming followed suit: in the late fourteenth century, coastal residents were forbidden to venture overseas. Only state-run “tribute missions” were allowed to do so. Further bans of private maritime commerce were issued in the fifteenth century and sometimes even extended to coastal shipping.

It is interesting here to open a parenthesis and reflect on the fact that, in the United States, coastal shipping is, since the 1920 Jones Act, limited to American-flagged, American-built, and American-crewed vessels, which has greatly increased shipping costs and made American maritime shipping (and shipwards) a puny competitor of its equivalent in contemporary China, South Korea, and Japan. (See the work of Colin Grabow.)

Schiedel continues with Chinese autarky and economic isolationism that have strangled the country’s development until the late 20th century:

At various points in the sixteenth century, the [Chinese imperial] government prohibited the construction and operation of large oceangoing ships and authorized coastal authorities to destroy such vessels and arrest any merchants on them. …

Guangzhou was designated as the only legitimate port for foreign trade in 1757. …

Bans did not stop trade but slowed it down, most notably from the fourteenth through the sixteenth centuries, when European overseas commerce embarked on its great expansion. Yet even if state fiat could not hope to put an end to private ventures, it did create antagonism between the authorities and merchants, deprive government of revenue, limit the scale of exchange, and promote corruption. The criminalization of commercial activities imposed additional costs, as merchants were forced to evade detection and bribe state agents to turn a blind eye.

The experience of Chinese autarky must be compared with the openness to trade and to new ideas and products that characterized many Western countries or city-states at the time. Another important book in that regard is Joel Mokyr’s A Culture of Growth: The Origin of the Modern Economy (Princeton University Press, 2017), which I reviewed in Regulation under the title “From the Republic of Letters to the Great Enrichment.” Mokyr writes (p. 315):

The importance of the Enlightenment for Europe’s subsequent economic development goes beyond its impact on the exploitation of useful knowledge for material progress, the essence of the Industrial Enlightenment. It also codified and formalized the kind of institutions any society needed to maintain its technological momentum: the rule of law, checks and balances on the executive, and severe sanctions on more blatant and harmful forms of rent-seeking. …

After it discovered China, the West eagerly borrowed Eastern ideas and imported goods. For example, “chinaware” was exotic and much in demand, and did not disguise its foreign origins. On their side, the Chinese elite were not interested in “cultural appropriation” from the West, so the country remained insular and mired in the past. It was soon lagging far behind the West in economic growth.

Finally, I have often recommended A Theory of Economic History (Clarendon Press, 1969) by John Hicks, who won a Nobel prize in economics a few years later. I think it is the most delicious economics book I have read. It is also very relevant to understanding the benefits of exchange and international trade. (I am not far from thinking that when one arrives at the Pearly Gates, St. Peter’s first question is, “Have you read A Theory of Economic History?”) In a Regulation review (“John Hicks and the Beauty of Logic,” Winter 2014-2015), I wrote:

A Theory of Economic History is a continuous celebration of exchange and its liberating power. “So long as trade is voluntary, it must confer an All-round Advantage,” wrote Hicks. Exchange leads to economic growth, which is what people generally want.

Merchants and other middlemen and financiers created modern trade and foreshadowed the Industrial Revolution, also called the “Great Enrichment.” A Theory of Economic History also warns against the danger of the state for trade and prosperity. Hicks notes (p. 162):

The name “mercantilist” is only appropriate when we are looking at history the other way, from the standpoint of the State, from the standpoint of the rulers. They become “mercantilist” when they begin to realize that the merchants can be used as an instrument for their primary non-mercantile purposes.

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Make China great: maritime navigation forbidden